Demand for a NordLB public sector Pfandbrief launched yesterday (Tuesday) exceeded the issuer’s expectations when Eu1.6bn of orders poured in during 35 minutes of bookbuilding, according to an official at the bank, with its hopes of single digit pricing also fulfilled.

Thomas Cohrs, NordLB

Leads Credit Suisse, ING, Natixis, NordLB and UniCredit priced a Eu500m no-grow December 2019 issue at 9bp over mid-swaps, the tight end of guidance of the 10bp over mid-swaps area that was revised from the low teens.

The leads did not take indications of interest, although soft interest in the region of Eu200m is said to have been registered after the deal was announced on Monday.

The deal is the tightest seven year euro benchmark priced this year, with a lead syndicate official noting that this was driven mainly by scarcity value, a thin pipeline, a supply-demand imbalance, and a solid domestic bid.

Another syndicate banker on the deal said that the order book “exploded” on the back of “tremendous” demand.

Thomas Cohrs, head of syndicate and origination, financial institutions and SSAs at NordLB, said that the deal was “superb”.

“The order books were only open for 35 minutes, and we had Eu1bn of orders within 10 minutes and Eu1.6bn by the end,” he said. “The level of demand definitely exceeded our expectations, which were for total orders somewhere in the region of Eu900m-Eu1bn, but definitely not Eu1.6bn.”

The issuer had targeted the 10bp over, with hopes of pricing inside of that, added Cohrs.

“The pricing was at the better end of our expectations, but did not exceed them,” he said.

He said that the deal has performed by around 5bp based on mid levels, with the bonds at around 6bp/4bp over this (Wednesday) morning.

Foreign accounts participated in the transaction to the tune of nearly 30%, which Cohrs said was a pleasant surprise.

“Given the spread, we thought the transaction would essentially be purely domestic,” he said, “but this wasn’t the case. This may be the first time we’ve seen UK accounts in our Pfandbriefe, for example.”

Germany took 72%, Switzerland 10%, the Benelux 10%, the UK 3%, Austria 2%, France 2%, and others 1%. Banks were allocated 49%, funds 37%, insurance companies 6%, central banks 6%, and others 2%.

The deal came a week after NordLB last Tuesday (10 July) priced the first ever aircraft Pfandbrief, a Eu500m five year deal that was re-offered at 55bp over, but Cohrs said the timing of the public sector Pfandbrief transaction was not directly connected to last week’s deal.

According to Cohrs, the public sector Pfandbrief was made possible by cover pool assets becoming available as a result of a review of balance sheet positions and under the issuer’s asset-liability management.

“We are very cautious with our cover pool,” he said, “but the freeing up of assets meant we could do a long dated Pfandbrief.”